The challenge
Given the economic volatility of the past few years, finance and treasury professionals at LyondellBasell (LYB) have sharpened their focus on working capital efficiency as part of a firm-wide value enhancement programme. At the core of this effort is a strategy to improve the company’s days payables outstanding (DPO) performance metric. While extending payment terms is a key objective, LYB was equally concerned with the health of the supply chain, and the cash flow pressure suppliers would face from any extension of terms.
At the same time, the team was looking for ways to contribute to the company’s broader ESG priorities. This presented an opportunity to launch one of the first global supply chain finance (SCF) programmes in the US with an ESG-linked feature.
The solution
In 2021, the team set out a goal to put a supply chain finance solution in place that would achieve the key objectives of integrating seamlessly with the company’s single global SAP instance, providing broad currency and country coverage to support maximum supplier participation, and helping drive broader sustainability objectives in procurement. Achieving these objectives would enable a win-win scenario for both the company and its suppliers.
The global scope of the programme was ambitious, providing SCF in all four major regions LYB does business – NAM, EMEA, APAC and LATAM. The programme would also cover 40 to 50 global buying entities involving more than 15 currencies. As well, it would provide increased visibility to suppliers through access to real-time invoice status using the programme interface designed by Taulia. Adding to the challenge, LYB wanted to roll out its programme in record time and achieve meaningful buy-in with smaller suppliers who wouldn’t traditionally be included in such initiatives.
Best practice and innovation
LYB’s treasury team formed and led a large cross-functional project team, including critical functions such as procurement, supply chain, business divisions, accounts payable, accounting, IT and legal. There was executive sponsorship of the group from the CFO as well as a steering committee. This project team was not only responsible for choosing a solution provider and implementing the SCF solution, but also for guiding its development and ongoing operations. The LYB team was complemented by the financial programme expertise of J.P. Morgan and the financial technology expertise of Taulia.
To ensure the SCF programme was strategically aligned with corporate ESG objectives, the team ensured the programme would use an ESG-linked feature related to early payments pricing. This approach was unique at the time in the US and had only been applied by few companies. To accomplish this, LYB utilised ESG ratings to benchmark suppliers, offering improved pricing for suppliers with qualifying scores. The company believes this feature will incentivise suppliers to obtain ESG scores and improve them over time.
A further innovation was the ability of the SCF solution to provide seamless, single sign-on integration with the existing SAP solution, improving the efficiency and security of the programme that touches several functions throughout the company.
Key benefits
-
Risk mitigated.
-
Exceptional implementation (budget/time).
-
Improved key performance indicator (KPI) metrics.
-
LYB’s solution is a leading SCF example which includes:
-
Deployment of a state-of-the-art solution globally and at scale.
-
A high-functioning project team that moved with speed for implementation.
-
A differentiated partnership between a top-tier bank (J.P. Morgan) and a fintech company (Taulia).
-
A sustainable win-win solution for suppliers and the company.
-
Outreach to all sizes of suppliers, big and small.
“Supply chain solutions need to be simple and effective. J.P. Morgan had the foresight to know that a nimble technology company with a state-of-the-art supply chain finance architecture would provide the most future-proof and easy to use platform for both our company and our suppliers.”
Tom Grasso, Assistant Treasurer
